4.19.13. General Case Development and Resolution

(1) This section contains information on examination procedures and administrative matters relative to the General Case Development and Resolution. It also provides a reference for common issues and related items that might be found on tax returns that are not compliant with the current tax laws and regulations for individual income tax returns and their related schedules.

(1) There are various code sections providing IRS authority to examine individual tax returns for correctness. By law, the IRS has the authority to conduct examinations under Title 26, Internal Revenue Code, Subtitle F - Procedure and Administration, Chapter 78, Discovery of Liability and Enforcement of Title, Subchapter A, Examination and Inspection, which includes, but is not limited to, the following Internal Revenue Code (IRC) sections:

• IRC 7602, Examination of books and witnesses

• IRC 7605, Time and place of examination

  Note: Additional information related to conducting examinations is contained in the 26 CFR (Code of Federal Regulations) 601, 105, Statement of Procedural Rules. See IRM 1.2.1.5, Policy Statements for the Examining Process.

(1) General Case Development and Resolution is used in Campus Examination Operations by managers, coordinators, examiners, and clerical staff to work, control, and monitor inventory for discretionary tax issues in both SB/SE and TS.

(2) The Director is the executive responsible for the programs that come under General Case Development and Resolution.

(3) The Program Manager is responsible for developing and implementing necessary plans and schedules for the accomplishment of the organization’s objectives

(4) The Department Manager is responsible for planning work to be accomplished by subordinates, setting/adjusting long and short-term priorities, and preparing schedules for completion of work. They assign work to subordinates based on priorities, and uses frontline managers to direct, coordinate, and oversee the work.

(5) The Inventory Control Manager is responsible for helping managers, directors, and office chiefs with a variety of processing, adjustments and computational issues including those affecting returns and cases, which may represent all significant divisional work streams.

(6) The Bankruptcy Coordinator is responsible for advising, initiating, and reviewing the full range of collection activities relative to the complicated procedures covered by the Bankruptcy Act.

(7) The Frontline Manager is responsible for assigning, directing, and reviewing the work of subordinate employees. They also plan and carry out training and development of employees, evaluate employees’ work performance, and perform all other related administrative functions.

(8) The Clerical Manager is responsible for assigning, directing, and reviewing the work of clerical employees whose responsibilities include processing incoming faxes and correspondence, controlling the work to correspondence units, and other related clerical duties.

(9) The tax examiners are responsible for contacting the taxpayer through correspondence or phone contact to obtain information, explain liability and encourage compliance.

(1) Program Reports:

• AIMS Centralized Information System (ACIS) reports are used by Headquarters Policy to review closure statistics and determine the effectiveness of each program.

• Embedded Quality Review System (EQRS) Reports are used by program analysts to identify error trends.

• National Quality Review System (NQRS) Reports are used by managers to identify error trends.

• The Statistical Sampling Inventory Validation Listing (SSIVL) allows a campus operation to perform validations of random samples of returns on AIMS, generates reports showing certain error conditions, and loads extracted information from AIMS into the Microsoft Access database application for further analysis. Use of the SSIVL system is required to validate AIMS inventory.

• Campus Operations Business Results (COBR) Reports provide year to date information on resource usage and inventory activity for major operational objectives. There are three COBR Reports for Examination, EITC, Discretionary and Quality. These reports are reviewed to determine if the operation is on target to meet their Plan.

• Target at a Glance (TAAG) Reports are a summary of the monthly COBR for the current Fiscal Year. The TAAG is used by the SB/SE Campus Exam Director for discussions with Campus Exam Operation Managers to address business measure targets not currently being met.

(2) Program Reviews:

• Operational reviews are conducted by Lead Tax Examiners and Frontline Managers to ensure case actions are in accordance with IRM procedures.

• Examination quality reviews are conducted using IRM 21.10.1, Embedded Quality (EQ) Campus Compliance.

• Program reviews are conducted by CEFS.

(1) Automated Correspondence Exam (ACE) is an IRS developed, multifunctional software application that fully automates the initiation and movement of Earned Income Tax Credit (EITC) and non-EITC cases through the audit process. See IRM 4.19.20, Automated Correspondence Exam (ACE) Processing Overview.

(2) Report Generation Software (RGS) is a comprehensive system used by SBSE, TS campus and LB&I examiners throughout the audit process. Cases are worked, closed and processed electronically via RGS.

(3) Audit Information Management System (AIMS), under IDRS command code AMDIS is a computer database system used by IRS Independent Office of Appeals (Appeals), Examination and TE/GE to control returns and input assessments/adjustments to Masterfile and provide management reports.

(1) Although it is best not to use words that require interpretation, there may be times when you may have to use them. If you do, you should include definitions for words which require interpretations. Consistency in preparing workpapers is critical in the examination process. The use of standard abbreviations and acronyms aids in consistency. The abbreviations and acronyms listed below may be used when preparing examination workpapers. When abbreviating, acronyms not listed below can be used if the definition is written out with the acronym next to it in parenthesis the first time used. Then, the acronym can be applied throughout the workpaper.

(1) For related resources such as IRMs, See Exhibit 4.19.13-2, Related Resources.

(1) The following are Correspondence Examination Programs with corresponding Source Codes:

(2) For QRP source codes, see IRM 4.19.14.9.2, QRP Source Code and Project Codes.

(3) For more information relating to source codes , please refer to IRM 4.4.34.4.16, Source Codes, and Document 6209, IRS Processing Codes and Information.

(1) Integrated Automation Technologies (IAT) tools are desktop productivity enhancing tools that will simplify taxpayer account processing. The IAT Website has a list of all available tools as well as a description and job aid for each tool. The IAT Home Page provides a list/description of all available tools and a job aid for each tool.

(2) All Examination employees must use the IAT tools. Some tools are mandated for use while others are suggested for use.

(3) The mandatory tools to be used and the programs they are used for are listed below:

(4) The suggested IAT tools to be used by examination employees, and a brief description of each tool, are listed below:

(1) Letters used for correspondence issues are referenced and linked in the program procedures.

(2) The names for the Content Point of Contact (POC) and Publishing Specialist for a letter can be found by researching the Electronic Publishing web site, https://publish.no.irs.gov/catlg.html. Any revisions must be discussed with the Content POC.

(3) Computer Paragraph (CP) Notices can be viewed on the Servicewide Notice Information Program (SNIP) SharePoint site, at https://irsgov.sharepoint.com/sites/SNIP.

(4) New and revised letters must be approved by the Office of Taxpayer Correspondence (OTC), prior to publication. All letter headers will contain:

• Taxpayer Identification Number

• Form

• Year

• Person to Contact Name

• Contact Person Identification Number

• Contact Telephone Number

• Contact Fax Number

• Contact Hours

(5) Correspondence letters can be prepared by the clerical staff or Tax Examiners (TE)/Correspondence Examination Technicians (CET).

(6) Letters mailed for cases in the corporate inventory will include the appropriate Business Operating Division (BOD) toll-free number, Tax Examiner as person to contact, and the site-specific identification number. If the letter being sent is in reply to taxpayer correspondence, then the letter, case history, and all letter attachments must identify the originating tax examiner to provide information for any subsequent contact, if needed.

(1) The following table lists the suspense period requirements for all EITC and Non-EITC cases being worked in Correspondence Examination and the earliest day for mailing the next letter. The information in the table covers manually issued letters and those issued through the Automated Correspondence Exam (ACE) System (formerly RGS Batch).

(2) Generally, a manually prepared letter/notice may be mailed on the 16th day after the taxpayer’s reply due date. If a letter has given a taxpayer 30 days to respond, the subsequent letter may not be mailed earlier than the 46th day from the date of the letter. The only exceptions to this are:

• For the EITC, W&I Non-EITC, and the single-issue PTC ICLs (with no report), the 30-day letter with report may be mailed no earlier than the 31st day following the ICL.

• The Letter 692-M, Request for Consideration of Additional Findings (Manual Letter), providing the taxpayer with a response/determination on submitted documents, may be mailed prior to the suspense period end date of an ICL or a 30-day letter. A manually prepared Statutory Notice of Deficiency may be mailed no earlier than the 31st day following a Letter 692-M.

(3) A letter cannot be transmitted to Correspondence Production Services (CPS) until the prior ACE suspense period has expired.

(1) Information on the audit return selection processes for W&I and SB/SE is found in IRM 4.1.26. Campus Exam Return Selection, Delivery and Monitoring. Information for Compliance initiative projects is found in IRM 4.17, Compliance Initiative Projects.

(1) Purpose: This standard measures whether consideration is given to the Classified/Program as well as large, unusual or questionable (LUQ) items during the course of the examination.

(2) Overview: Consideration of all significant tax issues during the examination is required.

(3) The following table shows the key elements of Auditing Standard 1.

(1) Purpose: This standard measures whether the examined issues are completed to the extent necessary to provide the examiner sufficient information to determine the substantially correct tax based on the correct application of tax law.

(2) Overview: The depth of the examination is determined through inquiry, observation, and analysis of appropriate source documents, oral testimony, contacts etc., to ensure full development of relevant facts concerning significant issues. Conclusions are supported by applicable law, which includes the Internal Revenue Code, Treasury Regulations, court cases, Revenue Rulings, etc.

(3) The following table shows the key elements of Auditing Standard 2.

(1) Purpose: This standard measures documentation of the scope, depth, and conclusions reached in the examination.

(2) Overview: The workpapers provide the principal support for the examiner’s report and document the procedures applied, information obtained, and conclusions reached in the examination.

(3) The following table shows the key elements of Auditing Standard 3.

(1) Purpose: This standard measures the presentation of the examination findings in terms of content, format, and accuracy.

(2) Overview: This standard addresses the written presentation of examination findings in terms of content, format, and accuracy.

(3) The following table shows the key elements of Auditing Standard 4.

(1) Purpose: This standard measures whether applicable penalties are considered and applied correctly.

(2) Overview: The application of appropriate penalties is required to be considered during all examinations. See IRM 4.19.13.7.1, Supervisory Approval of Penalties, and IRM 4.19.13.7.3, Penalty Lead Sheet Documentation.

(3) The following table shows the key elements of Auditing Standard 5.

(1) Purpose: This standard measures the utilization of time as it relates to the examination process.

(2) Overview: Timeliness of actions during the examination process is an essential component of each examination. Actions are initiated and completed within established time frames.

(3) The following table shows the key elements of Auditing Standard 6.

(1) Purpose: This standard measures whether the administrative aspects of the case are addressed.

(2) Overview: This standard encompasses correspondence, statute control, case assembly, power-of-attorney (POA) disclosure procedures and closing procedures.

(3) The following table shows the key elements of Auditing Standard 7.

(1) When research results show that a taxpayer has filed an amended return, the amended return must be requested to determine the impact on the examination. The amended return may contain information directly related to the examination or change other items on the return. Consider the taxpayer’s proposed adjustments following normal procedures. You may also refer to SERP job aid Form 1040-X Received During an Open Examination.

(2) The following actions must be taken to request the amended return:

(1) Examiners must check for a TC 922 using command code (CC) TXMOD or IMFOLT every time an examination case is handled.

1. There will be a TC922 on the taxpayer’s account if there is AUR involvement. If no TC922 is posted on the account, then proceed with next action. If there is a TC922 on the account, the corresponding process code(s) will indicate the current status of the AUR exam. Refer to IRM 4.19.3-4, AUR Process Codes, for definitions. Review CC IRPTRO for related payer information. AUR issues may match the Exam issues or there may be additional issues to consider including in the Examination. If AUR has already issued their CP 2000 letter, access Account Management Services (AMS) to review an electronic copy of the letter on the case module.

2. See below for general guidelines for handling open AUR and Examination combination cases:

If process codes indicate:	Then:
AUR open, Statutory Notice of Deficiency (SNOD) not issued.	Give a TXMOD print, with the TC 922 highlighted, and CC IRPTRO print to your work lead. Your work lead will contact the AUR Coordinator for the campus assigned to the case to close the AUR case. Determine the underreported issues to include in the Correspondence Examination and proceed.
AUR open, AUR SNOD issued.	Determine the AUR issues. If the AUR issues are the same or a substantial part of the Correspondence Examination issues, close the Exam case. If there are Exam issues other than those included in the AUR report, suspend action on the Exam case until the TC 922/AUR case closes, then follow AUR closed; assessment made (TC 290), below.
AUR open, Correspondence Exam SNOD issued.	Exam will not pursue AUR issues identified after the issuance of the Exam Statutory Notice of Deficiency. Give a TXMOD print, with the TC 922 highlighted, and CC IRPTRO print to your work lead. Your work lead will contact the AUR Coordinator for the campus assigned to the case to close the AUR case or suspend action until the Exam case is closed.

3. See below for general guidelines for handling closed AUR and open Exam combination cases:

If process codes indicate:	Then:
AUR closed to Campus Exam	Determine underreported or over-claimed issues to be included in the examination and proceed.
AUR closed to Field or Office Audit	Contact Field/Office assignee to coordinate issues and case actions.
AUR closed with no taxpayer contact	Determine underreported or over-claimed issues to be included in the examination and proceed.
AUR closed; assessment made (TC 290)	Identify AUR issues and determine whether to proceed with the examination. If proceeding, update the RGS return setup to include the AUR assessment changes per the adjustment shown on TXMODA and continue with the examination.
AUR closed no change	Identify AUR issues and determine whether to proceed with the examination.
AUR closed to Criminal Investigation or Fraud	If the project code is not defined for CI or Fraud cases, coordinate the examination with Criminal Investigation or Fraud Coordinator prior to contacting taxpayer. If CI or Fraud project code, proceed with examination. See Project Code Search for definitions.
Documented ID Theft Closure	Follow IRM 4.19.13.28.3, Taxpayer Replies, to close the case.

4. If case details are not covered in general guidelines, consult with your Work Lead. If additional guidance is needed, your Work Lead will contact the applicable AUR Coordinator for assistance.

(1) In accordance with IRC 6751, Procedural Requirements:

1. Each notice of penalty must include the name of the penalty, the IRC section for the penalty, and a computation of the penalty.

2. In general, the initial determination to assess the penalty must be personally approved, in writing, by the immediate supervisor of the individual making the initial determination, prior to any written communication of penalties to a taxpayer that offers an opportunity to sign an agreement or consent to assessment or proposal of penalty. SeeIRM 20.1.1.2.3, Approval Prerequisite to Penalty Assessments. For exceptions to this rule, see IRM 4.19.13.7.1(4), Supervisory Approval of Penalties.

   Note: IRC 6751 does not apply to the 2/10-year ban. However, supervisory approval is required for all 2/10-year ban cases as a matter of policy. See IRM 4.19.13.7.1.1, Supervisory Approval of Bans below.

   Note: Per IRC 6751(b)(1) Approval is a Prerequisite for assessment of the IRC 6662 Accuracy-Related Penalty, IRC 6676 Erroneous Claim for Refund, and IRC 6663 Fraud Penalty. An acting supervisor with an approved Form 10247 (Designation to Act) is considered an immediate supervisor for the purpose of IRC § 6751(b)(1). See IRM 20.1.1.2.3(7) and 1.4.40.3.9(1). A properly executed Form 10247 (Designation to Act) should be completed and saved in the case file within CEAS at the time the penalty approval form is signed for each case with a penalty being approved.

(2) Approval shall be made by leaving a CEAS non-action note specifically stating which penalty (including penalty subparts) is approved. In a deficiency case, the CEAS non-action note must be input prior to issuing any written communication of penalties to the taxpayer that offers an opportunity to sign an agreement or consent to assessment or proposal of penalty. See IRM 20.1.1.2.3.1, Timing of Supervisory Approval. If no communication meeting these criteria is sent, then the CEAS non-action note, including the supervisory approval, must be input prior to issuing the Statutory Notice of Deficiency (SNOD) that includes the penalty. Penalties proposed for assessment include, but are not limited to:

1. IRC 6662(d)Substantial Understatement Penalty, See IRM 20.1.5.9, IRC 6662 (d) and IRC 6662(b)(2), Substantial Understatement.

2. IRC 6662(c), Negligence Penalty See IRM 20.1.5.8, IRC 6662 (c) and IRC 6662(b)(1), Negligence or Disregard of Rules or Regulations.

3. IRC 6663, Fraud Penalty, See IRM 20.1.5.16, IRC 6663, Civil Fraud Penalty and IRM 4.19.10.4, Fraud Referrals.

4. IRC 6676, Erroneous Claim for Refund or Credit Penalty, See IRC 6676(a),IRM 20.1.5.18, and/or IRM 4.19.13.7.2, IRC 6676, Erroneous Claim for Refund or Credit Penalty.

(3) IRC 6702, Penalties for Frivolous Tax Submissions, require written supervisory approval on Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

(4) The following penalties are excluded from section 6751(b)’s written managerial approval requirement:

1. Penalties assessed under IRC 6651, Failure to File/Failure to Pay, and IRC 6654, Failure to Pay Estimated Income Tax, and IRC 6655, Failure by a Corporation to Pay Estimated Income Tax, IRC 6662(b)(9), Increase in Penalty in Case of overstatement of Qualified Charitable Contributions, and IRC 6662(b)(10), Penalty in Case of Disallowance of Deduction by Reason of Section 170(h)(7) are excluded from this requirement.

2. Any other penalty automatically calculated through electronic means is also excluded from this requirement.

(5) Correspondence examination cases in which the Substantial Understatement Penalty is systemically asserted will fall within the exception for penalties automatically calculated through electronic means if the taxpayer does not submit any response to the 30-day letter proposing the penalty. However, if the taxpayer submits a response, written or otherwise, that challenges the penalty, or the amount of tax to which the penalty is attributable, then the immediate supervisor of the IRS employee considering the response must input the CEAS non-action note prior to the employee’s first communication to the taxpayer of the penalties that offers an opportunity to sign an agreement or consent to assessment or proposal of the penalty. See IRM 20.1.1.2.3.1, Timing of Supervisory Approval.

(6) Penalty Lead Sheet Guidance for Supervisors:

1. Examiners must annotate the applicable penalty lead sheet to indicate the reasons for the assertion or non-assertion of the penalty, including methods and information utilized to support the conclusion.

2. Penalties should not be asserted without an explanation. The explanation must agree with the facts and circumstances of the case. Standard statements are not sufficient. An example, of a standard statement, "negligence penalty deemed not to be applicable" is not sufficient, because it doesn't state the reason it is not applicable.

3. Non-assertion of Substantial Understatement Penalty requires written supervisory approval when there is a substantial understatement of tax. See IRM 20.1.5.9, IRC Section 6662(d), Substantial Understatement, for substantial understatement criteria.

   Note: A CEAS non-action note must be input to indicate the manager's concurrence regarding the non-assertion of the penalty.

4. For more information on penalty lead sheet procedures see IRM 4.19.13.7.3, Penalty Lead Sheet Documentation.

(1) The IRC 6676 penalty applies when a taxpayer submits a claim for refund or credit of income tax for an excessive amount and reasonable cause does not apply. The penalty is 20 percent of the excessive amount claimed. IRC 6676(b) defines the "excessive amount" as the amount of the claim for refund or credit that exceeds the amount allowable for any taxable year.

(2) The IRC 6676 penalty should be included on examination deficiency report when determination of the penalty is dependent on the determination of a deficiency. That will be the case only when the taxpayer makes an erroneous claim for refund or credit of a refundable credit and the refund is frozen. The disallowed refundable credit will result in a deficiency, but because the refund is frozen, there will be no underpayment. See IRM 20.1.5.18, IRC 6676, Erroneous Claim for Refund or Credit Penalty.

(3) Pursuant to IRC 6676(d) the penalty shall not apply to any disallowed portion of the claim for refund or credit that is subject to one of the following:

1. Any component of IRC 6662

2. IRC 6662A

3. IRC 6663

Note: See IRM 20.1.5.18.3.1, Coordination with Other Penalties.

(4) Changes were made to IRC Section 6676 based on the passage of the Protecting Taxpayers from Tax Hikes Act (PATH Act), which are applicable to claims filed after December 18, 2015. The PATH Act:

1. Repealed the exception from the IRC 6676 penalty for Earned Income Credit.

2. Amended the definition of underpayment to allow refundable credits to reduce the amount of tax shown on the return below zero in calculating the amount of underpayment.

3. Changed the standard for penalty relief from "reasonable basis" to "reasonable cause". See IRM 20.1.5.19.3.4, Determining Reasonable Cause and Good Faith, when evaluating a taxpayer’s response and determining whether to remove the IRC 6676 penalty.

(5) For TS Only: Correspondence examination cases in which the IRC 6676, Erroneous Claim for Refund or Credit Penalty is systemically asserted can fall within the exception for penalties automatically calculated through electronic means. If the taxpayer does not submit any response to the 30-day letter proposing the penalty, the penalty will remain and be included in the stat notice (if deficiency procedures apply) and/or the final assessment.

(6) However, if the taxpayer submits a response, written or otherwise, that challenges the penalty, or the amount of tax or excessive refund or credit amount to which the proposed penalty is attributable, then the immediate supervisor of the IRS employee considering the response must input the CEAS non-action note specifically stating which penalty (including penalty subparts) is approved, prior to issuing any written communication that offers the taxpayer and opportunity to:

1. sign an agreement, or

2. consent to assessment or proposal of penalty

(7) When the taxpayer submits a response, follow the procedures in the table below:

(1) To ensure that the IRS applies penalties in a consistent and impartial manner, Exam employees must complete penalty lead sheets on all cases worked through deficiency procedures.

(2) The penalties most frequently asserted by examiners are:

1. IRC 6662(c): Negligence or disregard of rules or regulations

2. IRC 6662(d): Any substantial understatement of income tax

3. IRC 6676: Erroneous claim for refund or credit

(3) Lead sheets must be prepared:

1. With the Status 22 report (if the report was prepared manually),

2. With each reply after the Status 22 report, and/or

3. Whenever there is an adjustment to the original report.

(4) The Negligence Penalty must be considered and documented on all cases. If the Substantial Understatement applies, the Negligence penalty should be considered as an alternative position.

(5) The Substantial Understatement Penalty must be considered on all cases when the understatement exceeds the greater of $5,000.00 or 10 percent of the tax required to be shown on the return. The substantial understatement lead sheet must be prepared unless listed in paragraph 7 below.

(6) The Erroneous Claim for Refund Penalty is considered on all cases when a portion of the excessive amount of the claim for refund or credit was frozen but not refunded to the taxpayer, and reasonable cause does not apply.

(7) Lead sheets are not required for cases that are:

1. Worked solely through automated means (for example, no-response cases worked through ACE or Batch Leveraging Process).

2. No-changed based on examination of the taxpayer's initial response. However, the examiner must note in workpapers that penalties are not applicable due to no-change.

   Note: This includes accounts closed due to identity theft determinations.

3. Closed Agreed and the taxpayer has not previously submitted a response. If the taxpayer requests an Installment agreement, refer to IRM 4.19.13.11(3), Taxpayer Replies.

(8) Before completing the lead sheets, examiners must review:

1. The taxpayer's prior audit history (research CEAS/IDRS for the previous audit history),

2. The proportion of the questioned items in relation to other items on the return, (e.g., the proportion of the taxpayer's income to the items in question), and

3. Taxpayer correspondence.

(9) Only one accuracy-related penalty may be asserted on a portion of an underpayment. When both Substantial Understatement and Negligence penalties apply to a portion of an underpayment, assert the penalty with the strongest position and document the alternative position on a separate lead sheet.

(10) The Substantial Understatement penalty lead sheet is not required if it does not apply. The Negligence penalty should be considered and documented on the Negligence penalty lead sheet.

(11) The Erroneous Claim for Refund or Credit penalty shall not apply to any portion of the claim for refund or credit that is subject to accuracy-related penalties.

(12) On all cases requiring lead sheets, examiners must address the following issues:

1. Case Facts: Update the lead sheet to reflect the facts that support the assertion/non-assertion of the penalty.

2. Conclusion: The following guidelines should be used:

If	Then
The examiner determines that penalties should not be asserted	The conclusion must clearly state why penalties are not appropriate based on the case facts and the applicable penalty standard. General statements, such as "Penalties deemed inapplicable" are not appropriate.
The examiner determines that penalties should be asserted.	The conclusion must clearly state why penalties are appropriate based on the facts and circumstances of the case and the applicable penalty standard.

Note: Lead sheets must clearly explain the examiner's basis for the assertion or non-assertion of accuracy-related penalties.

3. Taxpayer Position: The taxpayer's position must be noted if the taxpayer provides a response to the Exam report and addresses the proposed penalty. If the taxpayer does not address the penalty in a response, the examiner will indicate that as well.

Note: If no penalty is proposed, no entry is required.

(1) Accuracy related/fraud and erroneous claim for refund or credit penalties should not be imposed if the taxpayer can demonstrate that they acted in good faith and that there was reasonable cause for such portion of the underpayment. (Reference: IRC 6664(c), IRC 6676(a), and Treas. Reg. 1.6664-4).

(2) Reasonable cause and good faith must be considered on a case-by-case basis evaluating all relevant facts and circumstances.

(3) When determining if reasonable cause applies, the examiner must first determine the efforts that the taxpayer made to file a correct return. Circumstances that may indicate reasonable cause and good faith include:

1. An honest misunderstanding of fact or law that is reasonable based on the facts and circumstances.

2. An isolated computational error (e.g., reliance on tax preparation software that has been reliable in the past).

3. Reliance on an information return or on advice of a professional tax preparer if, under the circumstances, such reliance was reasonable.

   Exception: Reliance may not be reasonable or in good faith if the taxpayer knew, or reasonably should have known, that the advisor lacked knowledge in the relevant aspects of tax law.

4. The taxpayer's inability to obtain records necessary to determine the amount of tax due, for reasons beyond the taxpayer's control.

5. The credibility of the taxpayer's reasons for not determining the correct tax liability.

   Note: See Treas. Reg. 1.6664-4, IRM 20.1.5.7.1, Reasonable Cause, and Exhibit 20.1.5-6, Determining Reasonable and Good Faith for additional guidance. This is not all inclusive.

(4) The taxpayer's compliance history, including prior audits, may also be useful in determining credibility and whether the taxpayer exercised ordinary business care and prudence in preparing the return. Disallowance for the same or similar issues should be considered when determining whether the taxpayer exercised ordinary business care. The single fact that the taxpayer has never been examined does not establish that the taxpayer meets reasonable cause/good faith criteria.

(5) All taxpayer requests for penalty abatement must:

1. Be in writing, and

2. Specific to the facts of the case.

   Note: Generic statements such as "Non-assertion (or abatement) of penalty per lead" or "Non-assertion (or abatement) of penalty due to reasonable cause" are not sufficient.

(6) Examiners must consider all penalty abatement requests and determine if the taxpayer meets reasonable cause/good faith criteria. Once determination is made, take the appropriate action below:

1. If a determination is made that reasonable cause does apply, follow guidance in IRM 20.1.5.4.2, Penalty Assessments and Abatements.

2. If a determination is made that reasonable cause does not apply, follow guidance in IRM 20.1.5.5(5), Post-Assessment Abatement Consideration of Accuracy-Related Penalties.

Note: A full paid Penalty is considered a claim. An unpaid penalty is considered an abatement. See IRM 21.5.3.2, What Are Claims for Credit, Refund and Abatement?, for more information.

(1) For more information on penalties, please refer to:

(1) Please see the "If And Then" Chart below on how to work the taxpayer responses. See IRM 4.19.13.2.4, Standard Suspense Periods for Correspondence Examination, for suspension periods applicable to the various statuses and time frames for issuing letters/notices.

(2) Attempt to contact the taxpayer or authorized Power of Attorney (POA) by telephone when the information provided is insufficient, and an audit report has been sent. The POA must be contacted in lieu of the taxpayer when a valid POA is present. Explain why the information sent is not sufficient and what is still needed. Document phone call in workpapers. The documentation should include the date, time and outcome of the phone call. The outcome would state whether or not the attempt to contact the taxpayer was successful/unsuccessful. If the attempt was successful, a brief synopsis of the phone call would be sufficient. If the attempt was unsuccessful, it should be recorded as well. Refer to note at end of IRM 4.19.13.11, Taxpayer Replies, for information concerning taxpayer appeals hearing rights.

(3) Refer to the table below for guidelines for working taxpayer responses when additional information is needed prior to status 24:

(1) Once cases are in Status 24, they should not be updated and should remain in Status 24 on AIMS.

(2) Please see the table below on how to work taxpayer responses after the 90-day letter has been sent.

(1) Evaluate the taxpayer’s written correspondence and take the next action as soon as possible. If unable to do this in 30 days, initiate interim letter.

(2) Judgment must be used based on the facts and circumstances in each case to make a proper substantially correct determination. Workpapers must contain all determinations, facts and circumstances, pertaining to the case obtained either by telephone or written correspondence. Caution must be used when leaving messages on taxpayer answering machines or using cell phones. See IRM 10.5.1.6.7.2, Answering Machines/Voice Mail, and IRM 10.5.1.6.7.1, Cell Phones and Cordless Devices, for more detailed information.

(3) If submitted documentation is not sufficient, an audit report has been sent and a phone number is available, call the taxpayer and clearly explain what documentation they need to submit. However, if the attempt to reach the taxpayer by telephone is unsuccessful, send the request for additional information letter.

(4) All telephone contacts must be recorded in the case workpapers when the case is currently assigned on CEAS to the examiner receiving or making the call. If the case is not assigned to the phone assistor, they will record the call in CEAS notes. This allows all employees access to the case information if the taxpayer writes or calls back. See IRM 4.19.19.4, CEAS Notes.

(5) Telephone contacts should be made at appropriate times. If a case is being worked before 8:00 a.m. or after 9:00 p.m., local time at the taxpayer’s location, the case should be left for a daytime telephone call.

(6) See IRM 4.19.13.26, Taxpayer Advocate Service (TAS) Procedures, for additional information.

(7) If a Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), is received from the taxpayer, expedite the form to the TAS Office in the Campus.

(1) The Tax Administration Council (TAC) approved the expanded use of faxes for receiving information and documents from taxpayers and practitioners. The changes are aimed at reducing taxpayer/practitioner burden as well as reducing the time it takes to resolve taxpayer cases and inquiries. The receipt of faxes should not require any significant changes to how the IRS handles open cases with taxpayers. It was intended as another means to receive case information.

(2) These general guidelines are applicable to all divisions and cover operations related to income tax, employment tax, excise tax, estate tax, gift tax, and generation skipping tax, as well as tax exempt and employee plans determinations.

(3) Filing of original tax returns via fax will be allowed only as part of a return perfection process (e.g., securing missing schedule or missing signature) initiated by the IRS or in the post-filing/non-filing activities.

(4) This allowance applies to inquiries and interactions conducted by Field Assistance, Accounts Management, Compliance Services, Field Examination, Field Collection, Determinations Units, Appeals, and the Taxpayer Advocate Service. Documentation, forms, letters, and returns can be received via fax in these circumstances even if a taxpayer signature is required, because faxed signatures are legally sufficient.

(5) The IRS will not acknowledge faxes received from taxpayers in the course of tax administration activities by a return fax. Exceptions can be made in unusual circumstances as determined by IRS management.

(6) Submission of documentation, forms, letters, and returns related to post filing/ non-filing inquiries and interactions can be allowed via fax based on taxpayer or IRS request unless there is a specific prohibition. Examples of documents that can be provided by fax in routine operations include:

• Form 2848, Power of Attorney and Declaration of Representative.

• Form 8821, Tax Information Authorization.

• Form 2553, Election by a Small Business Corporation.

• Appeals Conference Requests.

• Responses/documentation needed to resolve filing or post-filing questions or correspondence.

(1) The following documents/forms/letters can be accepted by fax if contact has been made with the taxpayer by phone or in-person, if the taxpayer history file is documented with the date of the contact, and if notation is made that the taxpayer wishes to send the documentation/form/letter by fax:

• Form 8857, Request for Innocent Spouse Relief.

• Form 3911, Taxpayer Statement Regarding Refund.

• Form 433-D, Installment Agreement.

• Letter to designate a payment.

• Letter to request non-assertion of penalty.

• Letter to provide reasonable cause statement.

• Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

• Form 944-X, Adjusted Employer’s ANNUAL Federal Tax Return or Claim for Refund.

• Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund.

• Form CT-1X, Adjusted Employer’s Annual Railroad Retirement Tax Return or Claim for Refund.

• Form 2553, Election by a Small Business Corporation.

(2) If taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to send the consent by fax, the IRS can accept by fax:

1. Consents to assess additional tax (Form 4549, Income Tax Examination Changes Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, and others) involving any amount of tax

2. Taxpayer closing agreements involving any amount of tax

3. Consents to extend the statute of limitations for assessing tax (Form 872, Consent to Extend the Time to Assess Tax, Form SS-10, Consent to Extend the Time to Assess Employment Taxes, and other consent forms)

(3) Employee Plan and Exempt Organization determination letter applications will not be accepted via fax.

(1) Correspondence or returns, received from taxpayers after the case is closed, that do not meet audit reconsideration criteria must be evaluated within 5 business days of receipt in the Operation. See IRM 4.13.1.4, Criteria for Reconsideration for more information. This correspondence consists of replies on:

• Closed case mail/return, which is date stamped prior to the case being closed or the mail was received and stamped within seven calendar days of the Exam closing.

• Closed cases which show the assessment as full paid.

• A closed claim examination including responses to Letter 105-C /Letter 106-C.

• A closed examination with a Stand Alone Accuracy Penalty Abatement request, refer to IRM 4.19.13.7.4, Reasonable Cause/Good Faith Criteria and Penalty Abatements.

(2) Because the taxpayer is still waiting for a response, the reply must be evaluated and a determination made within 14 calendar days.

(3) If the response cannot be worked within 14 calendar days, take the following actions:

• Ensure that the response is acknowledged as soon as possible. (Every attempt must be made to resolve the taxpayer's issue within 30 days from the receipt of the correspondence.)

• Open a Control Base on IDRS using Category Code "MISC".

• Input a STAUP for six cycles to delay the notices.

(4) The following table provides procedures for replies that have been scanned through the Correspondence Imaging Inventory (CII).

(1) Letter 686-B, Response to Taxpayer Request for Extension of Time to Reply , has been created for SB/SE Campuses only, to respond to the taxpayer when they request an extension of time during the audit process. This letter must be sent within three business days of an examiner identifying the document as a request to extend the response timeframe; the letter must state request for extension. Letter 686-B must indicate whether the extension has been granted or denied. SB/SE phone scripts have been updated to give the taxpayer the option of mailing or faxing their extension request.

(2) If a taxpayer requests additional time to submit requested documentation, the taxpayer will be automatically granted an additional 30 days on the first request (from the original response due date shown on Letter 566-S/Letter 566-T, or Letter 525/Letter 525-T, except for requests made after the 90 Day letter).

(3) For SBSE examiners only, Letter 686-B will be sent each time the taxpayer requests an extension regardless of whether the extension request was granted or denied . When an extension is granted, update the case to the previous status and the Aging Reason Code to 008. Workpapers (Form 4700) must also be updated for ALL extension requests (written, faxed, or verbally made).

(4) If subsequent time extensions are requested, judgment should be used based on the facts and circumstances for the individual case.

(5) If the request is made via a telephone call, a CEAS Action Note will be input to reflect that an extension to respond has been requested. The campus where the audit is being worked will address the request (For example, approval/denial) and send Letter 686-B within three business days of the Action Note. For further information, refer to IRM 4.19.19.4.1, CEAS Action Notes.

(6) The appropriate amount of extension time will be added to the end of the response due date. This date will be input on Letter 686-B under "Response Due Date".

(7) If the suspense period has expired but the case has not yet been processed to the next status, back the case down if possible (For example, if the next letter has not been issued or triggered to CPS), when granting the extension and send Letter 686-B.

(8) If it is not possible to back the case down (For example, next letter has already been triggered to CPS), send the Letter 686-B to inform the taxpayer that the extension cannot be granted and why. Every effort should be made to accommodate the taxpayer's request.

(9) An extension request can be classified in 3 ways and worked accordingly:

1. Correspondence requesting Extension "Only".

2. Correspondence requesting Extension "With" other attachments (For example, Documentation related to Audit, POA form, and any other relevant description of documents submitted).

3. Correspondence associated to the case, assigned as First in First out (FIFO) and Extension request received.

(10) The Letter 686-B will include the name of the tax examiner completing the letter, under person to contact, not just the words Tax Examiner. The letter will have the signature of the Operations Manager where the letter is mailed from (which should coincide with the Campus where the audit originated).

(1) Starting in TY 2014, the Individual Shared Responsibility Payment (SRP) provision requires that everyone have minimum essential health coverage for each month, qualify for an exemption, or make a Shared Responsibility Payment when filing their federal income tax return. This provision applies to individuals of all ages, including children. The SRP amount is $0 beginning after TY 2018; therefore individuals do not have to report their monthly coverage or whether they qualify for an exemption.

(2) CRN 869 will post to Form 5344 with one of the following values:

• 1 - Taxpayer checked the box on their return indicating they had full year health coverage

• 0 - Taxpayer did not check the box. Taxpayer may or may not have made a Shared Responsibility Payment (SRP)

(3) The CRN 869 must be removed from Form 5344 when closing a case Disposal Code (DC) 02 (No Change). Do not remove the CRN 869 or any other reference number when closing a case with any DC other than 02.

(4) Campus Exam will be required to adjust a self-reported SRP when the examination results in a change to income, exemptions, or filing status. This adjustment will be calculated and input after the Exam assessment has closed on AIMS. The taxpayer will receive separate notification of these changes through a Notice and Demand since the Individual Shared Responsibility Payment cannot be included with the SNOD.

(5) A monthly EOAD report will identify closed cases that might require an adjustment to the taxpayer’s self-reported SRP. Designated units at each campus will be responsible for recalculating the SRP when there are changes to income, exemptions, or filing status and for inputting the change to MFT 35 as needed.

(6) If the taxpayer self-reported an SRP on their return, their Initial Contact Letter and subsequent Exam reports will include a request for their SRP worksheet. When reviewing replies for TY 2014 and subsequent year returns, examiners will need to screen the reply for the presence of the taxpayer’s SRP worksheet. If the taxpayer submits a copy of their worksheet:

• Notate the receipt of the SRP in the workpapers.

• Make a copy of the worksheet and route it to the team responsible for SRP adjustments.

• Do not make an SRP adjustment on an open exam. Continue working the other exam issues without regard to the SRP.

(7) If the taxpayer requests a change to their SRP on an amended return being processed in Exam and the CRN 869 indicator on Form 5344 is a 1, route a copy of the taxpayer’s SRP worksheet (if provided) to the team responsible for SRP adjustments along with a note saying that the taxpayer is requesting a change to the SRP and no SRP was present on the original return. If the CRN 869 indicator on Form 5344 is a 0, process the taxpayer’s request for a change to the SRP as in item 4 above.

(1) Repetitive audit procedures apply to certain individual tax returns (See Exception list below), when the following criteria are met:

1. An exam of one or both of the two preceding tax years resulted in a no change, and

2. The issues in either of the two preceding tax years are the same as the issues selected for examination in the current year.

Note: Prior year surveys do not meet the criteria for repetitive audit procedures.

(2) If there was a prior audit, examiners should thoroughly research the CEAS database to secure prior audit information. For repetitive audit criteria to apply, the prior exam must have been conducted on the same issues and when applicable, the same dependent/relationship resulting in a no change.

(3) If the review indicated the taxpayer was audited in one or both of the two preceding years, determine if the taxpayer meets the criteria in IRM 4.19.13.11.9(1), Repetitive Audits, and proceed as follows:

1. If the taxpayer meets the criteria, examiners should survey the return. Examiners should follow the survey after assignment procedures in IRM 4.25.10.3.2, Survey After Assignment, Regular Case, and leave a CEAS note.

2. If the taxpayer does not meet the criteria, examiners must proceed with the examination.

(1) TS HQ and SB/SE Performing Planning and Analysis (PPA)/Campus Exam Document Matching Workload Planning and Analysis CEDWPA team will determine the number of additional days that will be used in the interim notices advising the taxpayer when to expect a response from Exam during peak periods based on mail volumes.

(2) TS HQ will make the determination using the Average Number of Days to Work Correspondence Report, Policy, Monitoring, Analysis and Quality (PMAQ) Exam Roll Schedule, and Mail Moved Weekly Report.

(3) SB/SE PPA/CEDWPA will make the determination using the Average Days Measures Report, Correspondence Exam Rolls Report, and Weekly Mail Monitoring Report.

(4) TS HQ and SB/SE PPA/CEDWPA will be responsible for submitting the change to the variable number of days for the sites. HQ will:

• Submit a KISAM ticket to request any change in date.

• Communicate the change in date in number of days to the PPA Manager/Chief/Operations Manager, via e-mail.

• Maintain a spreadsheet of all timeframe changes.

  Note: The ticket must be submitted by COB Tuesday, of any given week, to ensure IT makes the change in time for the weekend file run. The verbiage required on the ticket is: Please assign to the EOPS-ECC-MOB-IDSE group to update the AM21 card parm. File for (insert Campus) to (insert the new number of days).

  Example: "File for Atlanta to 140 days. File for Fresno to 130 days. File for Andover to 130".

  Note: The ticket can contain changes for one site or multiple sites.

(1) ACE programs duplicate the Letter 3219, Notice of Deficiency, for each individual filer of a joint return. The notices are mailed separately to each filer, even if they both reside at the same address. This is accomplished by use of a cover sheet, with only one of the joint names and the common address being printed on the cover sheet for each set of notices mailed. This separate mailing is required by RRA 98 (Restructuring and Reform Act of 1998) Section 3201(d). Statutory Notices not produced by ACE programs will require manual duplication and creation of individual cover sheets (only one joint filer name on each) to facilitate separate mailing of the notice to each taxpayer. No changes need to be made to the statutory notice (showing both of the joint names) that will be attached to each. The only requirement of RRA 98 Section 3201(d) is that it be mailed separately to each joint return filer.

(1) The Campus Liaison (CL) will review the new documentation and determine if Correspondence Exam can proceed with the examination.

(2) If the campus cannot work the case:

1. The liaison will explain the reason the case is being returned,

2. Sign Form 3210 and return it to Appeals.

(3) If the CL determines the campus can proceed with the examination the CL will:

1. Sign Form 3210 and return it to Appeals.

2. The CL will have the case updated on AIMS as appropriate and assigned to an examiner to work following normal examination procedures.

(1) Campus Exam will review the case/response to see if the case can be closed no change.

(2) If a case is closed as No Change after a SNOD is issued and the case is later identified on a Tax Court Docket list, Appeals does not need the casefile.

(3) If a case is opened in Appeals and can be closed No Change, complete Form 14121, No Change Certification, and upload to the Appeals Electronic Case Receipts SharePoint Portal.

(4) Once you reach the SharePoint site, use Click Here to Submit a New ECR and SWR Request, select Add New Electronic Case Receipts, and input the following:

1. For Business Unit - Select "Your BOD or Business Unit"

2. For Type of Case - Select "DKT No-Change F14121"

3. Enter Taxpayer Name

4. Enter TIN (SSN)

5. Enter MFT(s)

6. Enter Tax Period(s)

7. Enter Docket Number (if applicable)

8. Click Attachments and upload completed Form 14121

9. Click Submit

(5) Associate Form 14121 with the case file.

(1) Prior to updating a docketed case to Status 81, the case must be reviewed to ensure all mail has been considered and addressed.

(2) A petition is premature if a notice of deficiency (SNOD) has not yet been issued for a year currently under examination or if the SNOD was not issued prior to the filing of the petition. If a premature petition is identified during review then:

• Complete Form 15022, Part B, C and D

• Submit Form 15022 via Appeals Electronic Case Receipts SharePoint Portal

• Do not update AIMS or send case to Appeals

• Notate in CEAS that the petition was filed prior to SNOD being issued

Note: For more information see IRM 4.8.10.12, United States Tax Court Petition Filed.

(1) Jurisdiction of a docketed case must remain with the Office of Chief Counsel (Counsel) or Appeals . Therefore, when Appeals receives "new information" from a taxpayer, representative, or counsel of record for a docketed case that merits analysis by Examination; Appeals can request examination assistance (EA) via Form 14361, Docketed Examination Assistance Request - Jurisdiction Not Released. Appeals retains jurisdiction of the case while the new information is under review by Examination. See IRM 8.4.4, Examination Assistance Requests, for more information.

(2) P&A or Specified Campus Staff will receive and route any new information to the appropriate operation for examiner review.

1. The assigned Examiner reviews new information and makes a determination based on case research.

2. Within 14 days, the examiner notates the determination on Form 14362, Docketed Examination Assistance Issues and Results, and documents CEAS with a non-action note. If additional time is required to make an appropriate determination, the examiner will request additional time (up to 7 days), through the Campus Point of Contact (POC). The Campus POC will use the Appeal Officer (AO) point of contact noted on Part B of the Form 14362.

3. Examiner returns completed Form 14362, Docketed Examination Assistance Issues and Results, to the originating Appeals Officer via the dedicated email box.

(1) Tax examiners will contact the Examination Bankruptcy Coordinator for guidance on Exam cases with bankruptcy indicators. The coordinator will contact the appropriate Insolvency employee to determine the status of the bankruptcy proceedings for the case under examination, and furnish them with a copy of the Audit Report if necessary, for the proof of claim.

1. The Automated Insolvency System (AIS) and PACER (Public Access to Court Electronic Records) are used to locate the Insolvency office and track the status of the bankruptcy cases. Access permission and a password for each system is obtained using the BEARS system.

2. If, based on instructions in this section, contact with an Insolvency employee is required, use the Insolvency National Field/Centralized Site Directory at: Field Insolvency Mailboxes for phone and fax numbers.

3. If the case has not been started and a determination is made to continue with the examination, an Audit Report must be prepared to estimate the maximum adjustment for the proof of claim.

4. If the tax year being examined has a -V freeze but no TC 520, contact the assigned Insolvency employee to request that a TC 520 be input on IDRS.

5. For a list of bankruptcy definitions, see IRM 4.8.2.11.4.3.1, Definitions.

(2) If the taxpayer is in bankruptcy and disagrees with the proposed examination changes included in the 30-day letter.

1. Prepare and issue Letter 531, Notice of Deficiency, with Notice 1421, How Bankruptcy Affects Your Right to File a Petition in Tax Court in Response to a Notice of Deficiency, to the taxpayer(s) who are in bankruptcy instead of Letter 3219, Notice of Deficiency.

   Caution: If Letter 3219 was already sent to a taxpayer in bankruptcy, do not issue Letter 531.

2. Update EGC to Bankruptcy EGC 5033.

3. In the case of jointly filed tax returns where only one spouse has filed for bankruptcy, the petitioning spouse is issued Letter 531 with Notice 1421, and the non-petitioning spouse is issued Letter 3219.

(3) For bankruptcy cases filed with deficiencies related to post-petition taxes incurred by an individual or by the bankruptcy estate of an individual in a Chapter 7 or 11 are generally not covered by the bankruptcy’s automatic stay. Letter 3219, Notice of Deficiency, should be used instead of the bankruptcy, Letter 531, Notice of Deficiency, for post-petition tax deficiencies. For guidance on determining what is considered a post-petition tax liability, see IRM 5.9.10.9, Post-Petition Tax Liabilities.

(4) If the SNOD was issued to the taxpayer within 90 days of filing a bankruptcy petition, or the taxpayer files a bankruptcy petition before the SNOD is issued, the case cannot be defaulted (closed) while the bankruptcy’s automatic stay prohibits the taxpayer from petitioning the U.S. Tax Court, plus an additional 60 days after the stay ends.

(5) For bankruptcy cases with multiple filings the automatic stay may go into effect for only 30 days, or not at all, if more than one bankruptcy petition is filed within 12 months of the previous dismissal. The stay may also not go into effect if the taxpayer was a debtor in a small business bankruptcy case within the preceding two-year period. See IRM 5.9.5.7, Serial Filers, for additional guidance on conditions impacting the automatic stay period. If AIS or PACER research indicates a possible serial filer case, contact the Centralized Insolvency Operation (CIO) to request the status of the stay.

(6) If only one spouse files bankruptcy on a jointly filed tax return, special handling is required. Assessments need to be made on MFT 31 accounts set up for each spouse. Since the automatic stay has no effect on the spouse that does not file bankruptcy, the assessment for the non-petitioning spouse should be made within the normal Assessment Statute Expiration Date (ASED) period after expiration of the SNOD. Refer to IRM 21.6.8, Split Spousal Assessments (MFT 31).

(7) To have an MFT 31 module established for EACH taxpayer when only one spouse on a jointly filed tax return files bankruptcy, contact CIO via e-mail at cio.issues@irs.gov, at least 12 weeks prior to the expiration of the non-petitioning spouse’s 90-day period to request the joint account be mirrored. Mirroring is the splitting of the joint MFT 30 module into two identical but separate MFT 31 modules, one for the primary taxpayer and one for the secondary taxpayer, both mirroring the original return.

1. If CIO is not able to mirror the joint account, follow the procedures in IRM 4.19.3.22.1.10.2(9)&(10), Bankruptcy Procedures -AUR- Bankruptcy Coordinator Instructions, to establish an MFT 31 module for each spouse. If there are payments on the MFT 30 account, wait until the TC 971 AC 110 posts on the MFT 31 account and then move the payments to the primary taxpayer’s MFT 31 account. Once the payment posts, cross-reference the payment to the secondary taxpayer’s MFT 31 account. See IRM 21.6.8, Split Spousal Assessments (MFT31/MFT53) for more information.

2. IDRS Command Code AMCLSS will be used to make Exam assessments on MFT 31 modules. See IRM 2.8.7.9, AIMS Command Code AMCLS.

Note: Disposal Code 12 should be used when closing out the MFT 30 module via RGS.

(8) If the bankruptcy was filed after the expiration of the 90-day period, the assessment can be processed any time after the expiration of the 90-day period because the bankruptcy automatic stay does not prohibit the assessment of tax. See 11 U.S.C. 362(b)(9)(D).

(9) Filing for bankruptcy does not suspend or extend the ASED during the examination. The ASED must be protected by either issuing a SNOD or securing a Form 872, Consent to Extend the Time to Assess Tax, or Form 872-A, Special Consent to Extend the Time to Assess Tax. Refer to IRM 25.6.22, Extension for Assessment Statute of Limitations by Consent, for more information.

1. If the SNOD was issued, AIMS must be updated to Alpha Code "KK" when the remaining normal statute is within 180 days, per IRM 25.6.23, Statute of Limitations, Examination Process-Assessment Statute of Limitations Controls.

Caution: For jointly filed tax returns with a non-petitioning spouse, do not update to Alpha Code "KK" until the non-petitioning spouse has been assessed on an MFT 31 account.

2. An unfiled return requiring suspense should remain in Alpha Code "EE".

(10) Hold the case in suspense until the automatic stay terminates due to one of the following: 1) the bankruptcy is closed or dismissed, (2) the debtor is granted or denied a discharge, or (3) the stay is lifted by order of the Bankruptcy Court.

1. When the bankruptcy case is dismissed/discharged/closed, contact the Insolvency Unit to determine if the default assessment can be input by Exam.

2. If a case in bankruptcy is closed in error, the case must be re-opened and updated on AIMS to the prior AIMS status. Example: If the case was in Status 24 prior to closing, open AIMS in ST 24.

(11) Monitor the status of each case in the bankruptcy inventory.

• PACER must be reviewed monthly for each case to verify the status of the bankruptcy. PACER is a third-party service that provides detailed up-to-date information on the status of bankruptcy cases.

• The SSIVL listing must be used weekly to identify: 1) Cases in EGC 5033, 2) Cases in ST 24 with an X freeze in EGC’s other than 5033, and 3) Cases in EGC 5033 with no X freeze.

• 4.0 Listing must be used monthly to monitor the ASEDs and identify any statute imminent cases.

• Bankruptcy IAT Tool may be used to identify when a TC 520/521 is posted on an account. (PACER must be used to verify the information).

• ARP0843 weekly report, on Control D, may be used to identify the following action/transactions posting to the account; 1) Address change, 2) TC 976/977, 3) TC 604 and 4) TC 520/521.

(12) The ASED is suspended in a bankruptcy case if the SNOD was issued within 90 days before the filing of the bankruptcy petition on or after the filing date as explained in paragraph (4) above. Upon termination of the automatic stay, a new ASED must be calculated. The extended ASED must be addressed on Form 5344 when completing the case. The new ASED is calculated by adding the following to the original ASED:

1. The number of days the taxpayer was prohibited by the automatic stay from commencing a Tax Court case, plus

2. 60 days as provided by IRC 6213(f), plus

3. The portion of the 90 days as provided by IRC 6213(a) that had not expired before the bankruptcy petition was filed; plus

4. 60 days as provided by IRC 6503(a). See Revenue Ruling 2003-80 for a discussion of the effect of a bankruptcy on the running of the statute of limitations on assessment.

   Note: IRC section 6213(a) provides that the period to file a petition to Tax Court is 150 days if the notice is addressed to a person outside the United States.

(13) Use the worksheet in Exhibit 4.8.2-6, Bankruptcy Statute of Limitations Computation, to calculate the new ASED and default date.

(1) Refer taxpayers to TAS (See IRM 13.1, Taxpayer Advocate Case Procedures) when the contact meets TAS criteria (See IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria) and the taxpayer’s issue cannot be resolved the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases that can be completely resolved in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer’s issue. Do not refer "same day" cases to TAS unless the taxpayer asks to be transferred to TAS and the case meets TAS criteria. Refer to IRM 13.1.7.5, Same Day Resolution by Operations, and IRM 13.1.7.4, Exceptions to Taxpayer Service Criteria. When you refer cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and forward to TAS. For more information on Taxpayer Assistance Order (TAO) refer to IRM 13.1.20, TAS Taxpayer Assistance Orders (TAOs).

(1) When a case requires referral to the Examination function, the TAS employee prepares a Form 12412, Operations Assistance Request (OAR). Form 12412 identifies the taxpayer’s issue, specific assistance requested from the Operating Division or Function, TAS case criteria met, and recommendation for resolution. TAS will secure and forward copies of signed amended returns and/or any documentation necessary for the resolution of the OAR.

(2) OARs are mailed to the Exam Unit via a Form 3210, Document Transmittal. To the extent possible, the Form 12412 and attachments will be sent via encrypted e-mail. The Form 12412 and attachments may also be faxed, mailed, or hand carried to Exam.

(3) Referrals from TAS will include:

• Cases controlled on AIMS [Open -L Freeze].

• Cases previously controlled on AIMS [Audit Reconsiderations].

• Cases referred from another part of the Service [Accounts Management, AUR, or Collections] for Exam classification. Examples: CAT-A, EITC Form 1040-X, Amended U.S. Individual Income Tax Return, or Source Code 38.

(1) TAS Case Advocate will:

1. Contact the taxpayer regarding issue(s) with the examination process such as refund or examination processing delays.

2. Forward completed OAR Form 12412, Operations Assistance Request (OAR) with supporting documentation to Exam.

3. Be the main conduit for all taxpayer contact. The TAS Case Advocate will forward any document request from the Examiner to the taxpayer and forward any information received from the taxpayer to the Examiner, unless otherwise specified.

4. When working prior year over-aged inventory, or securing additional documentation, the TAS Case Advocate may facilitate a conference call with the taxpayer and the Examiner to expedite closing the case.

5. Timely inform the Examiner if the taxpayer does not reply within the time frame agreed upon.

6. Monitor for the adjustment(s) to post including TC 840 (Manual Refund transaction), after the Examiner has closed their case.

7. Ensure Hold Codes are released.

(1) Operational Liaison/Exam Coordinator is an Exam technical employee who will review the Form 12412, for completeness and correct routing. The OAR must contain:

1. A written explanation of the request for assistance,

2. A due date for completion,

3. The name, telephone, fax number of the TAS employee making the request, and

4. Documentation to resolve the TAS issue.

(2) If the Form 12412, is incomplete, contact TAS within one (1) workday of the determination, and within one workday of the receipt of the OAR in the case of expedite processing to obtain information. If TAS cannot provide the information needed for the liaison to assign and work the OAR, within three workdays of the request, return the case to TAS.

(3) If an OAR is routed by TAS to the incorrect office or campus location, the TS, SB/SE and or EITC Business Unit Liaison will reject and return the OAR to TAS within three workdays of receipt or within one workday where TAS has requested expedite processing. The appropriate Business Unit Liaison will complete Section VI of Form 12412 indicating the reason for the rejection, citing the TS SLA Addendum, or SB/SE SLA Addendum and IRM references (when applicable). TAS will issue a new OAR with the correct routing information.

(4) If the Form 12412 is complete:

1. Obtain AMDIS prints, if needed.

2. Write or attach the AIMS Source Code, Status Code, EGC and Project Code on the top of Form 12412.

(5) If the case is in AIMS Status 00-09, the Operational Liaison or designee will screen the case and resolve if possible. See IRM 4.19.13.26.5, Premature Referral Cases, AIMS Status 00-09, for procedures.

(6) The Operational Liaison will determine which team/function is responsible for resolving the taxpayer issue. For OARs that require expedite processing, the receiving office will assign within one workday to a tax examiner (TE) upon receipt from TAS. All other cases will be assigned within three workdays.

(7) For all cases involving complete OARs, the Operational Liaison, or designee will

1. Date stamp and record the OAR case information in the Compliance TAS database or TAS Ledger.

2. Assign the OAR to the appropriate Exam team.

If	Then
Currently assigned to an examiner	Assign to the AIMS EGC.
The case is in ACE and not previously assigned to an examiner	Assign cases equitably to the units.
The case is in clerical suspense	Secure and refer to the last assigned (examiner) team.
Audit Reconsideration cases	Refer to Centralized Reconsideration Unit (CRU).

3. Do not place TAS cases in a separate status code.

4. Open IDRS control "911-TAS" in the action text.

5. Notate Form 12412, history sheet and place any attachments on the inside of the case folder.

6. Acknowledge receipt of the OAR by completing items 1-3 of Section V and entering action date in Section IV.

7. Within three days of receipt, or within one workday when TAS has requested expedite processing, acknowledge receipt of the OAR and provide the team manager's name and telephone number for assigned OARs. If Form 3210 was received with the OAR, it will be returned by either fax or mail or an automated notification will be generated and sent via e-mail to acknowledge receipt. Acknowledgement of OARs may be made via e-mail.

(8) For aging consistency purposes, all operations will use calendar days when counting the age of a case.

1. The start of the aging process will occur when the faxed or mailed OAR is received by the operational liaison from the TAS office.

2. Day one of the process will be:

If	Then
An OAR is received before 2:30 p.m. in the time zone receiving the OAR	It will be considered received that day.
An OAR is received after 2:30 p.m.	It will be considered received the following business day.

3. End date will be the day the operational area completes IDRS input and records the OAR closing on the Compliance TAS database.

4. The case age will be calculated by subtracting the Day One date from the End Date.

(9) Any OAR closed "No Relief Granted" will be closed out of the receiving area's inventory and returned to the TAS office. These cases should never be rejected back to TAS. If the taxpayer asks to reopen their case, and sends in new additional information/documentation, the incoming OAR will be opened and treated as a new request/case.

(1) Upon receipt of an OAR case, research/review ACE Action Report or other IDRS prints as necessary for prior year examination closing action.

(2) If the prior year return was closed with no changes and the same information is reflected in the current year, close the case. Refer to IRM 21.4.4, Manual Refunds, if applicable and IRM 4.19.14.7, Recertification, for procedures on removing the recertification indicator.

(3) If the taxpayer was examined and the research indicates that one or more dependents were disallowed in the prior year, review CEAS or obtain copies of workpapers and RAR (Examination Report).

• Verify the dependent SSN that was allowed from the prior year report and follow appropriate closing action.

• Verify the dependent SSN that was disallowed from the prior year report. Inform TAS caseworker that a full examination will be conducted and assign case to an Exam team.

• If a different child(ren) is (are) claimed, inform TAS caseworker that a full examination will be conducted and assign case to an Exam team to prepare the initial contact letter.

(1) Operational Liaison will:

1. Notate in the Compliance TAS database the date the case was closed and what action was taken to close.

2. If the case was a no reply, notate that the case was returned to normal exam work, and

3. Fax or generate automated transmission of the completed Form 12412, OAR, and hand carry or mail the case to the appropriate TAS office.

(1) The completed folder is given to the clerk for input. Using information found on the Form 12412, OAR, the clerk will:

1. Update TAS cases to special EGC, if applicable, as designated by the unit manager, so that the cases can be tracked easily.

2. File the copies of the Form 12412 and the fax transmittal confirmation in the "OAR" log book.

3. Prepare a Form 3210, Document Transmittal, if necessary, with the information notated by the Operational Liaison/Exam Coordinator and hand carry to the proper team for assignment to TE.

4. When the case is closed by the TE or by the Operational Liaison/Exam Coordinator, the case will be returned to clerk for disposition.

(1) The TE will:

1. Review the description of assistance requested by TAS and requested date of completion. The Exam TE and TAS Case Advocate will agree upon the time frames for follow-up based on the facts and circumstances of the case.

   Note: TAS will notify Exam when a taxpayer meets criteria for expedited processing. The examiner will make all determinations based on facts and circumstances of the case, IRM procedures and application of tax law. TAS will not make a determination on the issues but may recommend specific action(s) be taken. Contact TAS before closing case.

2. Enter all documentation and information on RGS workpapers, as with any other case. For cases not on RGS, prepare manual workpapers.

3. Research RGS, IMFOL, TXMOD, AMDIS and other sources as outlined under IRM 4.19.14.6, Evaluating EITC Taxpayer Responses.

4. Respond within three workdays in writing, fax, or hand delivery to the TAS Case Advocate the relief/no relief decision if the case requires expedite processing.

5. Inform the TAS Case Advocate by the negotiated date of the resolution if the case does not require expedite processing.

(2) The TAS Case Advocate must be kept apprised of action and/or contacts made by the TE with the taxpayer or practitioner. Telephone contact with the TAS advocate will not be conducted using the toll-free telephone number.

(3) TE case evaluation of TAS referral steps:

(4) Examination Closing of TAS referral steps:

(5) After all the closing actions have been completed, including inputting any adjustments:

1. Close the IDRS control on the case, note on the action item how the case was closed.

2. Complete items 4-10 of Section V of Form 12412.

3. Give the case along with the Form 12412 to the Operational Liaison.

(1) The IRS identifies accounts impacted by a declared disaster by zip codes and inputs a TC 971 Action Code. Depending on the type of relief assigned to that zip code area, a master file -S or -O freeze will be generated.

1. The -S freeze on the account stops interest and penalties for a determined timeframe but does not stop compliance activities or notices.

2. The -O freeze on the account stops interest and penalties for a determined timeframe, stops compliance activities, and stops most notices.

(2) These freeze codes do not prevent cases from establishing on AIMS.

(3) The Disaster Indicators will post on the entity portion of IDRS, which are defined as follows:

1. 1 = -S freeze active

2. 2 = -O freeze active

3. 3 = both -S and -O freezes are active

4. 4 = not currently active.

(4) To set the freeze code you will take the following actions:

1. Use CC ENMOD

2. Input CC REQ 77

3. Input TC 971

4. Input Transaction date = disaster start date

5. Input Secondary date = disaster end date

6. Input TC 971 / 151 CD = 087 for -O freeze

7. Input appropriate FEMA NUMBER

(5) The freeze codes will be automatically removed when the disaster period ends.

(1) For impacted taxpayers with an -S freeze on the account, Campus Examination will continue normal case processing. All contacts with the taxpayers during the disaster period will include Notice 1462, Important! You Have More Time to File and Pay Your Taxes Due to a Disaster.

(2) For impacted taxpayers with an -O freeze on the account, Campus Examination will postpone normal case processing unless otherwise guided in this IRM sub-section.

1. Contact with the taxpayer should be postponed until after the disaster ending date unless necessary to protect the statute of limitations.

   Caution: Monitor the IRS Disaster Assistance alerts and IRWeb for information regarding extensions to postponement periods.

2. In addition to the master file codes, disaster coding will also be present on the following IDRS command codes:

• ENMOD/IMFOLE - transaction code (TC) 971 and AC 087/688

• ENMOD/IMFOLE - "2" - Account under special disaster processing per Section 7508A

• AMDISA - "2" - Disaster Victim Code

(3) Update all -O freeze disaster cases in Status 10 and above to Employee Group Code 5055. Cases should remain in EGC 5055 throughout the entire Exam process.

(4) Take actions below for case processing on impacted taxpayers with an -O freeze on the account:

(5) Any cases updated from status 24 in error should be corrected.

(6) Generally, there should be no correspondence sent to taxpayers in disaster areas during the postponement period, unless responding to a taxpayer-initiated inquiry or to protect the statute of limitations. Correspondence received for case in EGC 5055 and/or with -O freezes will be screened for agreed, no change cases, and requests to continue their examination within 5 business days of receipt within the function. This includes audit reconsideration and closed case (status 90) mail correspondence.

(1) Taxpayer replies, including replies received in Status 24 - Agreed or No Change:

1. Complete case actions for closure.

(2) Taxpayer Replies - Disagreed or requests additional time:

1. Open AIMS - If the taxpayer disagrees and provided information that changes the previous report, delay issuing the revised report for the duration of the notice suppression period. Update to status 56 per table above.

2. Closed or No AIMS - If the taxpayer provides information that changes the addressed report, complete the abatement. Keep the IDRS control base and CEAS record open and, document the action. The taxpayer will be issued the resolution notice after the postponement date ends.

(3) Taxpayer Replies - Requests for examination to continue:

1. Do not remove the disaster freeze codes.

2. Do not update the case from EGC 5055.

3. Clearly notate the workpapers to document the taxpayer's request.

4. Continue to the next required actions.

5. Prioritize the case by assigning it to a tax examiner to be worked right away.

6. Case will require manual processing. Systemic processing cannot override the disaster coding on the account.

7. Include Notice 1155 with any letters and reports to the taxpayer.

(1) Claims or Amended Returns - Work claims (1040X) that have sufficient documentation available to make a determination. Only allow or close claims that would benefit the taxpayer.

(2) Do not start any claims cases; postpone all actions during the disaster period. The requirement for married filing joint taxpayers to provide a completed Form 3911, Taxpayer Statement Regarding Refund, does not apply when the taxpayer is inquiring about a refund that may have been lost, stolen, or destroyed.

(1) The disaster freeze codes do not extend the statute dates - ASED or CSED.

(2) Examination will protect imminent statutes by issuing statutory notices for taxpayers located in the affected counties during the compliance activity postponement period, if the statute of limitations will expire during that period and a statute extension cannot be secured.

(3) No statutory notices of deficiency will be issued during the compliance activity suspension period if the statute of limitations will not expire during that period.

(4) If the statute of limitations and the 90th day to petition Tax Court fall within the postponement period, the taxpayer’s time to file a timely a court petition is postponed until the end of the postponement period.

(5) Because the CSED or ASED statute is not extended by IRC 7508A, it may be necessary to retain evidence of the initial mailing of deficiency notices.

(1) Contact with taxpayers impacted by a disaster must be made with caution and extreme sensitivity to the taxpayer's personal circumstances, using the "soft contact" procedures. See IRM 5.1.12.2.7, Soft Contact Procedures.

(2) If the taxpayer calls, explain their case has been suspended until the end of the disaster period. Provide the taxpayer with information available on Disaster Assistance and Emergency Relief for Individuals and Businesses at irs.gov Pub 3067, IRS Disaster Assistance - Federally Declared Disaster Area, which contains information for impacted taxpayers. If the taxpayer suffered a loss, they may be able to take a casualty and theft loss.

(3) Advise taxpayer to read Publication 3067 (EN/SP), IRS Disaster Assistance - Federally Declared Disaster Area, and to call our IRS Disaster Assistance Hotline at (866)562–5227.

(4) Additional information can be found at Disaster Assistance and Emergency Relief Frequently Asked Questions at: Disaster Assistance Information.

(5) If taxpayer states they would like the IRS to continue with the examination, we will proceed with the examination. If possible, obtain this request in writing. Provide the taxpayer with E-fax numbers when possible.

(6) For those taxpayers who indicate they have been impacted by the disaster, all compliance activity must be suspended. See IRM 25.16.1.3, Identification of Covered Disaster Area, Postponement Period, and Affected Taxpayers, for information regarding taxpayers eligible for disaster relief for self-identification. Taxpayer's self-identifying as impacted by the disaster will have the appropriate freeze manually placed on their account.

(7) If the taxpayer indicates hardship, refer to Taxpayer Advocate Service using Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order). Give the taxpayer advocate phone number 1–877–777–4778. The Form 911 should clearly state that the taxpayer made the request after the actual date of the disaster.

(8) Exam will initiate any case actions to provide hardship relief to the impacted taxpayers.

(9) All hardship manual refund requests do not have to go through TAS. Verify if the taxpayer would prefer the manual refund issued as a direct deposit for quicker receipt. See IRM 3.17.79.6.4.2, Certifying Automated Clearing House (ACH)/Direct Deposit Hardship Refunds.

(1) Do not update cases to EGC 5055.

(2) If identity theft is suspected or alleged, conduct IDRS research as specified in IRM 4.19.13.28.1, Research, to determine if any ID theft indicators are present then proceed based upon the facts and circumstances.

(3) If Return preparer misconduct is suspected or alleged, conduct IDRS research as specified in IRM 4.19.13.32, Campus Exam Return Preparer Misconduct (RPM) Referrals.

(4) If cases don't meet the requirements in 2 or 3 above, suspend the cases per the disaster procedures.

(1) At the end of the disaster postponement period, taxpayer contacts within the designated area must be made with caution and extreme sensitivity to the taxpayer's personal circumstances. Stress and fatigue are factors needing consideration, even in instances where taxpayers did not experience any personal, monetary, or physical damage from the disaster.

(2) Before resuming action, review the IRS Disaster Assistance alerts posted and IRWeb for information regarding extensions to suspense periods.

(3) Resume normal examination procedures after the postponement period has expired.

(4) For cases where a SNOD has been issued to an affected taxpayer, whether prior to or during the disaster relief period, if the original default date was calculated to fall on or before the end of the disaster relief period, the extended default date would be the same as the end of the disaster relief period.

(5) If the SNOD was issued to an affected taxpayer and it defaulted prior to the beginning of the disaster relief period, then there is no extension of time to petition the Tax Court. The default date remains the same as it was prior to the disaster relief period.

(6) If the SNOD was issued to an affected taxpayer during the disaster relief period and the original default date is calculated to fall after the end of the disaster relief period, then the default date remains the same as originally calculated. There is no extension of time to petition the Tax Court provided by the disaster relief granted.

(1) Use good judgement when reviewing documentation.

(2) Consider the taxpayer's situation and impact from the disaster. If the taxpayer states their records were lost or destroyed, consider the documents required to substantiate the questionable item and determine if the taxpayer could reconstruct the information without putting an undue burden on the taxpayer. For example: obtaining mortgage or charitable contributions statements from another source or obtaining third party documentation to substantiate a child's residence for EITC.

(3) If insufficient or no documentation can be provided:

1. Annotate workpapers with the determination.

2. Managerial Approval is required to close a case no change. The manager needs to leave a CEAS non action note stating they agree to close this case and the reason for closing the case without appropriate documentation.

(4) Work case per IRM 4.19.13.11, Taxpayer Replies, for subsequent action.

(5) We will grant up to an additional 30 days if the taxpayer requests an extension to provide information. Use the following table if the taxpayer requests a reasonable period of time (30 days or less) to comply:

(6) The SNOD must be mailed to taxpayers at their last known address and duplicate notices mailed to all newly discovered addresses.

(1) In some cases, it will be necessary to rescind the SNOD by following procedures in IRM 4.8.9.30, Rescinding Notices of Deficiency.

(2) Procedures and guidelines for rescinding a SNOD:

1. The taxpayer must initiate the rescission by filing Form 8626, Agreement to Rescind Notices of Deficiency.

2. All criteria must be met to consider the rescission of the Notice of Deficiency. SeeIRM 4.8.9.30.1, Criteria for Rescinding.

3. There must be 90 days left on the Statute or a secured Form 872 or Form 872-A, Consent to Extend the Time to Assess Tax, signed by the taxpayer, or both taxpayers if a joint filed return. Refer to IRM 25.6.22, Statute of Limitations - Extension of Assessment Statute of Limitations by Consent, for more information.

4. A rescission cannot be entered into if the taxpayer petitioned tax court or it has been 90 days (150 days for notice mailed to addresses outside the United States) since the notice was issued.

5. If the notice of deficiency was issued to both a husband and wife, the rescission agreement must be signed by both spouses or authorized representative(s) for the parties.

6. The rescission agreement must apply to the same tax periods as the notice of deficiency.

7. The rescission agreement must reflect the same deficiency and penalties as the notice of deficiency.

8. If all conditions above are met, the Form 8626 must be reviewed and agreed upon by a Group Manager or higher. Somebody delegated into the Group Manager position cannot enter into the rescission agreement.

9. The date of rescission is the date that both parties enter into the agreement.

10. Send Letter 2262, Cover Letter for Transmitting Signed Rescission, with a copy of the executed rescission agreement to the taxpayer.

11. If the IRS does not agree, then Letter 2263, Exception Letter to Notice of Deficiency Rescission, needs to be sent to advise the taxpayer that the rescission is not being granted and the notice of deficiency will remain in effect.

(1) When an Identity Theft (IDT) allegation (phone call or correspondence) is received in TS Exam and IDT documents have not been submitted, research CC ENMOD/IMFOLE to ensure the account does not already have an IDT indicator; for both open or closed AIMS cases, and for the same tax year/incident. An IDT indicator is a TC 971 with an AC 501, 504, 505, 506, 522 or 524 for all cases reflecting an appropriate Tax Administration Source Code (INCOME, INCMUL, MULTFL, NOFR, DEC PRISNR, OTHER). See IRM 25.23.2.4.1, Tracking and Reporting Identity Theft Cases - Identity Theft Indicators.

(2) The following are common indicators that may lead to an IRS-identified ID Theft (IRSID):

• -A freeze or TC 976/977 Decedent accounts

• Payments - TC 610, 640, or 670 posted on accounts where a TC 150 refund return was posted

• Late filed balance due return posted on accounts where a TC 150 refund return was posted

• Extension to file - TC 460 on an account with a timely (early) filed TC 150 return posted

• Returns with filing pattern changes including different unrelated or deceased dependents

• MFT 32 - houses current year fraudulent Identity Theft returns discovered by IRS

(1) Request Identity Theft Form 14039, Identity Theft Affidavit. See IRM 25.23.2.3, Identity Theft Claims - General Guidelines.

(2) If a taxpayer submits correspondence indicating they are a victim of IDT, request the documents on Form 886A and prepare the case for the next stage of the audit. If the case is in Status 24, use Letter 555 to request the Form 14039. Inform the taxpayer this does not extend the time to petition Tax Court, per IRM 4.19.13.11, Taxpayers Replies.

(3) If the extension request is made via telephone call, input an Action Note on CEAS to reflect the requested extension is being granted and for how long. The case is suspended until the alleged ID theft is confirmed or denied. See IRM 4.19.19.4.1, CEAS Action Note, if needed.

• If the case is open at another Campus or not assigned to you, input a CEAS Action note to alert of the IDT allegation. They will be responsible for doing the updates to the account as appropriate.

  Note: When making or receiving phone calls, technicians must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer to prevent unauthorized disclosure of tax information.

(4) Utilizing the Query Screen in RGS, add the appropriate amount of extension time to the end of the postponement period regardless of how much time remains on the original postponement period.

1. If the postponement period has expired but the case has not yet been processed to the next status, back the case down if possible (i.e., if the next letter has not been issued or triggered to CPS).

2. If it is not possible to back the case down (i.e., next letter has already been triggered to CPS) the taxpayer must be contacted to inform them that the extension cannot be granted and why. Every effort should be made to accommodate the taxpayer's request. Encourage the taxpayer to fax the documentation, if possible.

3. Cases in AIMS status 24 will run concurrently with the 90 day suspense period. The status 24 postponement date is only adjusted if the 30 days ends after the 90 day postponement date.

4. Update to Employee Group Code 5066 and input ARC 14 to indicate a taxpayer will provide or has provided the required documentation.

(5) All identified employee returns with Identity Theft allegations must be sent to the appropriate Area Office PSP Employee Audit Coordinator. Follow IRM 4.19.11.3.2, Employee Returns.

(1) When the taxpayer submits the requested documents, prepare the case to be referred to IDTVA TS in Accounts Management.

1. Ensure the Form 14039 is complete; the document is considered complete when sections A, B and C are filled out. See IRM 25.23.10.7.4.1, IDTVA Specialities Exam General Procedures.

   Note: A photo ID or a signature on the form is not required to make a referral to IDTVA.

(2) IRM 25.6, Statute of Limitations, provides the service-wide procedures for identifying and processing statute returns. Statute protection applies to ID Theft referrals if the Assessment Statute Expiration Date (ASED) is within 180 days of expiring. Exam will close the audit and refer to IDTVA in a Red folder.

(3) Notate CEAS Workpapers. See IRM 4.19.13.6, Workpapers for All Cases.

(4) Update to EGC 5066 and input ARC 14, if not already present, to indicate a taxpayer provided the required documentation.

(5) For TS, Close AIMS using Disposal Code 12, TC 300 $0.00, Manual Assessment amount of $1, Hold Code 4, and Priority Code 1.

• Input the TC 971 AC 010 to reset the -A freeze, only on cases that already have an -A freeze on the account. Use a posting delay code of 1 cycle to allow the TC 300 to post first.

• Make a copy of the Form 14039 and any supporting documents, not available electronically, to be placed on the PAS wall with closing documents.

(6) For SBSE, Close AIMS using Disposal Code (DC) 37 AFTER completing the steps below.

(7) For SBSE campuses, follow the additional procedures:

• If the AIMS was re-opened (TC 300 indicator = 6 and there is time on AMDISA) and there is no additional adjustment to be made, close with DC used prior to re-opening.

• Do not remove EITC, CTC/ACTC/Refundable CTC, or AOTC Recertification indicator, if present on EITC cases.

• RGS/CEAS workpapers will be notated with a detailed explanation of the closure as an identity theft case and to be forwarded to IDTVA for resolution. A lead/manager must authorize/approve the closure by leaving a CEAS Non-Action Note.

• If time is charged on RGS, archive the record and then manually close AIMS with a non-examined DC.

• Case closed DC 37 is not counted as a Correspondence Examination case closure and therefore not reviewed in the National PAS review.

• Statute imminent cases with less than 60 days will be transmitted separately to IDTVA using expedite procedures.

• Issue Letter 086C to inform the taxpayer of the referral to IDTVA, use the address on Form 14039, Identity Theft Affidavit. If a SNOD has been issued, remind the taxpayer that this letter does not extend the time to petition the Tax Court. Follow IRM 21.3.3.4.2.1, Use of 86C Letter - Referring Taxpayer Inquiry/Forms to Another Office, the IRM provides the exceptions of when the 086C is not required to be sent.

  Caution: Issue Letter 086C to the address the taxpayer has provided. The address on ENMOD may be incorrect. Do not update the address on master file.

(8) Leave a history item on TXMOD IDTVAREFRL.

(9) Input TC 971 AC 522 UNWORK, if not already present, on ENMOD to identify a pending IDT claim when the IDT documents are received. Refer toIRM 25.23.2-10, IMF Only TC 971 AC 522 Tax-Related Identity Theft, Case Status (Initial Claim/Suspicion). Prior to marking the account, research ENMOD/IMFOLE to ensure the questionable tax year does not already have an IDT indicator for the same tax year.

(10) Forward the Form 14039 and any supporting documents, not available electronically, to IDTVA via Form 3210. Cases can be sent via E-Fax when available.

(11) If correspondence is received on a closed AIMS case (Closed Case Mail) and a Form 14039 or Police Report, with some indication that it is related to IDT, route to IDTVA via Form 3210 to be screened by IDTVA. Follow procedures outlined under IRM 4.19.13.28.1, Research, and IRM 4.19.13.28.2, Requesting Documentation, as applicable in authenticating and securing documentation.

(1) Integrity Verification Operation (IVO) in some cases updates a taxpayer’s address on master file to a campus address when they determine a taxpayer is a victim of ID theft and is unable to determine a valid address for the tax year they are addressing. They correct the account and place the IDT indicators on the record they are working. If Exam has other years open, the address change will impact the validity of the SNOD if it is not corrected from the campus address. In order for the SNOD to be valid, it must be issued to the last known verified address and not to the Service Center address.

(2) If the case contains IDT indicators on the account see IRM 4.19.13.28.1, Research. Exam will close the AIMS record and route the physical case to IDTVA in AM, see IRM 4.19.13.28.3, Taxpayer Replies.

(3) If the case DOES NOT contain IDT indicators, Exam will use the last known address to continue the audit. Search IDRS for the most recent filed return using appropriate CFOL and IDRS command codes including RTVUE, TRDBV and IRPTRO to support the last known address. Update the address on IDRS and RGS/CEAS from the Service Center address to the last known address on the return.

(1) If the taxpayer does not provide the requested documentation in 30 days, update out of EGC 5066 and return to normal Exam processing and/or the next stage of the examination. The campuses are responsible for monitoring the postponement dates for timely action.

1. The AIMS/Batch/RGS Coordinator will monitor and update batch cases out of EGC 5066 as appropriate.

2. If the case is in a technical unit, they will monitor and update out of EGC 5066 as appropriate.

Note: ARC 14 remains on these cases allowing tracking of how many alleged ID Theft cases were returned to normal Exam processing.

(1) If IDTVA determines a taxpayer is not a victim of identity theft and the audit should continue, they will:

• Notate all actions on AMS prior to returning a case to Exam.

• Leave a TXMOD history item "Not IDT, refer back to Exam".

• Route the case to Exam Attn: AIMS Coordinator via Form 3210.

(2) The AIMS Coordinator, or an authorized employee, will restore the AIMS database in the appropriate status code, unarchive RGS/CEAS, and assign to a technical unit to resume the audit process as required.

(1) Follow the table below for recording time spent on IDT duties: Identity Theft Time Reporting

(1) Internal Revenue Code section 104(a)(5) allows the exclusion of disability income received prior to minimum retirement age by individuals for injuries incurred as a direct result of a terrorist action directed against the United States (or its allies). No specific annotations or processing instructions apply to these returns and amended returns, but taxpayers may reference "Publication 3920" or "IRC Section 104(a)(5)".

(2) If a technician or Cat-A classifier discovers or receives a return, amended return, correspondence or a telephone call in Examination inventory or CII inventory excluding terrorism-related disability income, normal Examination procedures apply.

(1) Taxpayers claiming to be a victim of Return Preparer Misconduct (RPM), must submit their claim on Form 14157, Complaint Tax Preparer, and Form 14157-A, Tax Return Preparer Fraud, or Misconduct Affidavits with documentation to support their claim of preparer misconduct. See IRM 25.24.1.2, RPM General Documentation Requirements, for additional information.

(2) If an extension request is made via a telephone call, input an Action Note on CEAS to reflect the requested extension is being granted and for how long See IRM 4.19.19.4.1, CEAS Action Note.

• If the case is open at another Campus or not assigned to you, input a CEAS Action note to alert them of the RPM allegation. They will be responsible for doing the updates to the account as appropriate.

(3) If a taxpayer submits correspondence indicating they are victim of RPM, request Form 14157/14157-A on Form 886A and prepare the case for the next stage of the examination. If the case is in Status 24, and attempts to reach the taxpayer are unsuccessful, use Letter 555, Notification of Findings Based on Taxpayer Data - Tax Liability, to request the required documentation. Inform the taxpayer this does not extend the time to petition Tax Court, per, IRM 4.19.13.11.1, Taxpayer Responses - After Status 24.

(4) Utilizing the Query Screen in RGS, add the appropriate amount of extension time to the end of the suspense period, regardless of how much time remains on the original suspense period.

(5) If the suspense period has expired but the case has not yet been processed to the next status, back the case down if possible (For example., if the next letter has not been issued or triggered to CPS.).

(6) If it is not possible to back the case down (For example, next letter has already been triggered to CPS) the taxpayer must be contacted to inform them that the extension cannot be granted and why. Every effort should be made to accommodate the taxpayer's request. Encourage the taxpayer to fax the documentation, if possible.

(7) Cases in AIMS status 24 will run concurrently with the 90-day suspense period. The status 24 suspense date is only adjusted if the 30 days ends after the 90-day suspense date.

(8) Encourage the taxpayer to send a signed Form 14157/14157A, a signed tax return, and/or a copy of the signed return they received from the tax preparer.

(9) Update to Employee Group Code 5088 and input ARC 96 to indicate a taxpayer will provide the required documentation.

(1) All procedures are applicable to both TS and SB/SE except where specifically identified by BOD.

(2) When the taxpayer submits the requested documents, Form 14157/ Form 14157-A, Return Preparer Complaint/Tax Return Preparer Fraud or Misconduct Affidavit, prepare the case to be referred to the IDTVA Specialty Function Exam Team located in Kansas City. See IRM 25.24.2.2 , Return Preparer Misconduct, (RPM) Complaints Overview for additional information.

(3) IRM 25.6, Statute of Limitations, provides the service-wide procedures for identifying and processing statute returns. Statute protection applies to RPM referrals if the ASED is within 180 days of expiring. Exam will close the audit and refer to IDTVA in a red folder.

(4) Notate CEAS Workpapers. See IRM 4.19.13.6, Workpapers for all Cases.

(5) Update to EGC 5088 and input Aging Reason Code (ARC) 96, if not already present, to indicate a taxpayer provide the required documentation.

(6) For TS, close AIMS using Disposal Code 12, TC 300 $0.00, Manual Assessment amount of $1, Hold Code 4, and Priority Code 1. If not already present, include ARC 96 to indicate a taxpayer claimed an RPM allegation.

1. Input the TC 971 AC 010 to reset the -A freeze, only on cases that already have an -A freeze on the account. Use a posting delay code of 1 cycle to allow the TC 300 to post first.

2. Make a copy of Form 14157/14157A and any supporting documents not available electronically to be placed on the PAS wall with closing documents.

(7) For SB/SE, follow same procedures as IDT closure per IRM 4.19.13.28.3(6) and (7) , Taxpayers Replies. Close AIMS Disposal Code (DC) 37 after completing the steps per the If and Then chart.

(8) Leave a history item on TXMOD "IDTVAREFRL".

(9) Forward Form 14157/14157A and any supporting documents not available electronically to IDTVA via Form 3210.

(10) If correspondence is received on a closed AIMS case (Closed Case Mail) and Form 14157/14157A or Misconduct Affidavits are attached, route to IDTVA via Form 3210 to be screened by IDTVA.

(11) For Ghost Preparer/Non Signing, refer to IRM 25.24.1.2, RPM General Documentation Requirements.

(1) If the taxpayer does not provide the requested documentation in 30 days, update out of EGC 5088 and return to normal Exam processing and/or the next stage of the audit.

1. The RGS Coordinator will monitor and update batch cases out of EGC 5088 as appropriate.

2. If the case is in a technical unit, they will monitor and update out of EGC 5088 as appropriate.

Note: ARC 96 remains on these cases allowing tracking of how many alleged RPM cases were returned to normal Exam processing.

(1) If IDTVA determines a taxpayer is not a victim of RPM and the audit should continue, they will:

1. Notate all actions on AMS prior to returning a case to Exam.

2. Leave a TXMOD history item "Not RPM, refer back to Exam".

3. Route the case to Exam Attention: AIMS Coordinator via Form 3210.

(2) The AIMS Coordinator, or an authorized employee, will restore the AIMS database in the appropriate Status Code, unarchive RGS/CEAS, and assign to a technical unit to resume the audit process as required.

(1) Use function 718 and the program code you are currently working when reporting time spent on RPM related cases.

(1) Taxpayers who are invited to use TDC for their correspondence exam will receive an Initial Contact Letter (ICL) that includes the link to sign up for Secure Messaging. These ICLs include Letter 566-T, Initial Contact - Secure Messaging, and Letter 566-J, ICL - 45 Day Combo - Secure Messaging, in lieu of the standard Letters 566-S and 566-B. If a project code has a unique ICL, invited taxpayers will receive the TDC version of that ICL.

(2) Letter 525-T, Exam 30-Day Letter - TDC Version, is used in lieu of Letter 525.

(3) Letter 692-T, Request for Consideration of Additional Findings, is sent in lieu of Letter 692-M.

(4) If any additional letters are needed, use TDC versions on RGS.

(1) To effectively identify how many taxpayers sign up to use TDC, various AIMS Tracking Codes are used. Proper input of the correct tracking code will assist management in determining if a taxpayer opts into TDC and will track the taxpayer’s involvement throughout the TDC process.

(2) Workload delivery inputs tracking code 2020 on all cases that are eligible and invited to use TDC.

(3) A clerk will update the tracking code (TC) to reflect the current status of the TDC case. Updating a tracking code will override the previous tracking code since there can only be one tracking code per case. Based on actions taken by the taxpayer, the clerk will update the tracking code as follows:

• Update to TC 2022 when a taxpayer opts in to use TDC.

• Update to TC 2023 when a taxpayer opts in to use TDC but still sends in documentation using another method such as mail, Document Upload tool or eFax.

• Update to TC 2024 when a taxpayer opts in to use TDC but later abandons the use of TDC. Use this tracking code when the taxpayer informs us, they no longer wish to communicate via Secure Messaging.

• Update to TC 2028 on the current year when a taxpayer used TDC for a prior year and elects to use TDC for the current examination.

• Update to TC 2029 when a taxpayer who was not invited to use TDC, (no TC 2020), but authenticated and accessed the TDC system and will be allowed to use TDC.

Note: It is the assigned tax examiner’s responsibility to ensure tracking codes on AIMS and RGS are correct each time the case is worked.

(1) To facilitate the best use of the TDC digital platform, some standard procedures for correspondence examinations are modified for cases worked in TDC. Unless otherwise stated in this IRM section, the same procedures for working a paper correspondence examination are followed with the following exceptions:

• When a Secure Message (SM) has correspondence attached, put the case in mail status by self-assigning the case. The Correspondence Received Date (CRD) must be the date the SM is received, unless after 2pm or received on Saturday, Sunday or a holiday which can be the next business day. However, there is no requirement to close the case within 48 hours. Refer to IRM 4.19.19.6, Self-Assign General, for additional information.

• If a taxpayer opted in to use Secure Messaging and is selected for a subsequent year examination, the subsequent year case can be self-assigned and worked in TDC at the taxpayer’s request, even if it is open in another BOD. Refer to IRM 4.19.19.6, Self-Assign General, for additional information.

• An attempt to contact the taxpayer or authorized representative by telephone will not be made when the information provided is insufficient and an audit report has been sent per the TDC Terms of Service agreed to by the taxpayer, contact will be made via Secure Messaging. Refer to IRM 4.19.13.11, Taxpayer Replies, for additional information.

• If a taxpayer submits a signed agreement, the case is not required to be updated to Status 51 prior to closing. Refer to IRM 4.19.13.11, Taxpayer Replies, for additional information.

• General contacts with the taxpayer that are not a part of the examination conclusion may be documented in non-action notes in lieu of the workpapers. Refer to IRM 4.19.13.3.3, Workpapers Support Conclusions, for additional information.

• If a taxpayer requests additional time to respond, Secure Message (SM) 686 B will be sent in eGain in lieu of Letter 686-B. Refer to IRM 4.19.13.11.7, Taxpayer Requests Additional Time to Respond.

• An interim secure message will generate to the taxpayer if an inbound activity is not completed within 30 calendar days of receipt. This message will advise the taxpayer that the IRS will respond no later than 45 days from the date the message is generated. If the message remains open after 45 days, the next interim message must be sent manually by the assigned examiner.

(1) Guidance for working a correspondence examination in TDC can be found in the TDC User Guide.